Watchdog Sees Financial Weak Spots

WASHINGTON—Federal officials said the U.S. financial system remains vulnerable to shocks and called for better protection in several areas that exacerbated the 2008 financial crisis.

The Financial Stability Oversight Council, a new body created by last year's Dodd-Frank financial law, said several areas could pose broad risk to the financial system, including a $2.7 trillion short-term funding market used by Wall Street firms and money-market mutual funds. It also warned the U.S. faces risk related to Europe's debt crisis...